Summary of EC Anti-Competition Decision Against Google

The European Commission has fined Google €2.42 billion for breaching EU antitrust rules. Google abused its market dominance as a search engine by giving an illegal advantage to another Google product, its comparison shopping service. Commissioner Margrethe Vestager, who is in charge of competition policy stated, “[Google] denied other companies the chance to compete on the merits and to innovate. And most importantly, it denied European consumers a genuine choice of services and the full benefits of innovation.”

The Basis of EU Competition Law

Dominance in the marketplace is defined as behavior to an appreciable extent independently of competitors, customers, and consumers. (United Brands [1978]). If a firm has a dominant position, because it has beyond a 39.7% market share (BA/Virgin [2004]), then there is “a special responsibility [for the dominant company] not to allow its conduct to impair competition on the common market.” (Michelin [1983]). The commission has found that not only does Google have dominance in the general internet search market (exceeding 90% in most EEA countries), but due to its practices, Google’s comparison shopping services have increasingly gained traffic while rivals have suffered substantial losses.

Market Impact

This outcome is a huge win for its shopping comparison competitors. Other companies such as Oracle and Yelp have signed a letter in support of the EU fine. Both companies have been in ongoing legal battles against Google for several years. Yelp, a consumer review site, in particular has complained that Google blocked its service in search results limiting their international business. The company was part of a group back in 2014, which requested the EU investigate Google’s prioritized shopping searches. This decision will help any persons or businesses affected by Google’s anti-competitive behavior and make it easier for victims to obtain civil damages in domestic courts.

Damages

The fine is the highest ever imposed by the Commission. €2.42 billion has been calculated on the 2006 Guidelines and are on the basis of the value of revenue for the shopping service in the 13 EEA countries affected.[1] In addition, Google will need to cease their conduct within 90 days of the decision and begin giving equal treatment to rivals. The company will need to explain how it intends to ensure compliance and if it fails to do so, as per Article 102 of the Treaty on the Functioning of the European Union (TFEU) and Article 54 of the EEA Agreement, can be fined an additional 5% of the average daily worldwide turnover.

Google has claimed that the decision “doesn’t fit the reality of how most people shop online,” and has announced it will consider appealing the decision to the European Court of Justice, which will be its final hope of undoing the charges.

Conclusion

By demoting its competitors shopping services, the Commission has found Google’s comparison-shopping service in breach of EU anti competition law. Regulators are still investigating two related other charges, including the Android mobile operating system that promotes other Google products and may be creating an unfair disadvantage to rivals. The decision will either benefit the average user by increasing competition between shopping alternatives; or it will be a reminder to ISPs that their business practices need to be tailored to the specific legal frameworks of each region.

[1] Google introduced this practice in all 13 EEA countries where Google has rolled out its comparison shopping service, starting in January 2008 in Germany and the United Kingdom. It subsequently extended the practice to France in October 2010, Italy, the Netherlands, and Spain in May 2011, the Czech Republic in February 2013 and Austria, Belgium, Denmark, Norway, Poland and Sweden in November 2013.